The Introduction of SIIQ Real Estate Investment Companies in Italy: Opportunities for Investors and the Market

Recently, the Law, no. 296 (Budget Law) introduced a new tax regime option for joint stock companies listed on Italian market (SIIQñSociet‡ di Investimento Immobiliare Quotate),whose main activity is real estate investments. The new regime offers significant advantages for the companies and the investors: companies may opt to be taxed under the new regime. With the new law the income from the real estate activities by those companies is totally tax free. The dividends distributed to their shareholders will be subject to full taxation whereas no withholding tax is applicable on dividends of pension funds and regulated investment funds. Any company opting to be taxed under the new law must distribute to its shareholders at least 85% of its net income deriving from real estate rental activity. In order to qualify as a SIIQ, a company must meet some conditions. It must be an Italian joint-stock company, which mainly perform renting activities of properties. Real estate properties must represent at least 80% of the assets and the revenues from real estate renting activities must represent at least 80% of the income. The aim of this paper is to compare this new form of investment with other international experiences, to examine the effect that the new regime will determine on Italian property market and to study the return thresholds which the property should have to be hold in the Siiq portfolio. Moreover, the paper will look at the role of the residential sector which, with a different tax regime, can increase its presence in portfolios.